Are they selling supplies? Supplies and vintage items are the exception to the handmade policy, so don't worry about it if that's the case. If they're selling the items as handmade, then you should report the shop. Before you do that though, I'd try to make very sure that they actually are the same items and don't just look similar or haven't been altered to make them fit within Etsy's definition of handmade, because it can create a lot of problems for a shop owner if they're items are incorrectly reported.